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tv   Bloomberg Markets Asia  Bloomberg  July 30, 2017 9:00pm-12:00am EDT

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♪ >> i am rishaad salamat. japan's factories rebounding, waiting for data out of china. kim jong-un saying america is within range. all agree more must be done about north korea. >> i am haidi lun in sydney. asian equities saying a strong this rally in five years. more resilient than wall street, we ask why. this is "bloomberg markets: asia." ♪
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rishaad: getting straight to breaking news out of china. manufacturing pmi crossing the terminal. let's get straight to tom mackenzie. pretty much in line. yes, a bit below estimates, 51.4 is the number for the july manufacturing pmi in china. that compares to the survey estimates of 51.5, compares to june, the surprise beat in june of 51 point seven, so a little bit slower than what we saw in june. still well within expansionary territory. liked see early indicators the sales managers index that showed strength there.
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the sales managers survey stronger than it has been in two years. steel and metal prices have picked up as well. points to further strengthening and momentum. we are getting the nonmanufacturing pmi number. july,or the month of nonmanufacturing pmi, below the 54.9 number we saw in june. don't think that will cause any great concerns. what these numbers do show, yes, starting to expand at a slightly slower rate, manufacturing and nonmanufacturing pmi, but still seeing fairly strong growth into the second half of the year, growth that has surprised many because we have seen stronger , a lot ofted exports spending come up to degree fiscal spending, on infrastructure. hasmberg intelligence pointed out they are spending as a ratio on infrastructure as a
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ratio of total investment than even during the financial crisis of 2009. bloomberg intelligence warning that infrastructure spending is buying stability now, but potentially storing up risks further down the line. the other important sector is the real estate sector. so far this year. that had been an area of concern, but there is an expectation amongst many economists there will be a gradual slowdown in real estate prices. second and third tear cities have remained relatively resilient, those large inventories in smaller towns in cities have been sold off, prices in the first year and second-tier cities have cooled. the manufacturing picture for july, pmi at 51.4, marginally below estimates and just slightly below that 51.7 number in june. i think really just adding to the taste of relatively decent momentum and decent strength in
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the chinese economy heading into the second half. many expect after the party september,at happens october, november, after that is done and dusted, you may see clamps down on liquidity and moves on policy that may cool the economy further, but very much the focus it is ought is on stability leading up to this political event. we have the first and second quarter gdp numbers at 6.9% committee the overall growth target for the chinese government that they set themselves is 6.5% or above, and as things stand, they are well on track to hit that target. this july manufacturing pmi number. privateget the caixin indicators tomorrow, and a look at the smaller companies that have greater exposure and demand from exports, external demand. early indicators suggest that
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exports remain strong. , theumber for the caixin expectation is 50 point or compared to last month. this is the official statistics an official pmi, 51.4. haidi: just dialing it back a notch, but very much sticking with this theme of stability as we head into that 19th people's congress. tom mackenzie with breaking china pmi numbers in beijing. let's get caught up with first word news in singapore. hasinda: the u.s. military aged a show of force and korea, sending two nuclear-capable be-one bombers across the country. this is in response to the latest missile launch by north korea. kim jong-un says the success of the second icbm means the whole of continental u.s. is in range.
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russia says it is concerned about the launch and is ready to back new measures against pyongyang. u.s. toas told the reduce embassy and consular staff across the country by 755 people by september 1 following new sanctions agreed by congress. that would be more than half the personnel and lower the total to 455, the same number russia has in the u.s.. president putin said he would refrain from further measures in the but his administration warned it would act if necessary. >> this retaliation is long overdue. if the u.s. side decides to move further towards further deterioration, we will answer, we will respond, in kind. we won't mirror this. we will retaliate. factory output's rebounded in june as global demand continue to support economic recovery. industrial production increased 1.6% from may when it fell 3.6%.
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you're on your production was up almost 5%. global demand and a weak yen have helped japanese exporters the liver five consecutive quarters of expansion, the longest run in a decade. semblance of unity and westminster of her brexit did not last long. chancellor philip hammond said consensus was forming around a three-year transition during which little would change in the relationship with the eu. was harmonious vision shattered when trade secretary liam fox told the sunday times that he was involved in no such discussions. and its allies have reinstated a list of 13 demands , saying they must all be met before the country's diplomatic isolation can end. the alliance met and said there can be no compromise until doha stops supporting extremist groups, a claim it denies. the 13 demands had been cut to
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six broad principles but now again include the closure of the al jazeera tv network. global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. rishaad: right, well, less than half an hour before the start of the trading day in hong kong. singapore, taiwan, malaysia in the mix, but also the pmi number, and the aussie dollar is the main reactionary point. what is going on. >> we have had a little downturn, some weakness on the open for the aussie, but economic momentum in that latest number out of china, so a little downturn come although it looks like the aussie is trying to claw back that small decline in the still down .3% against the dollar. we had momentum from the aussie last week when it breached $.80 for the first time in two years.
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other currencies, the yen stronger against the dollar by .2%, so that is weighing into equity markets in japan. is down .1%, falling further from that 20,000-point level. elsewhere, south korea's kospi coming off again. it was the big decline or wind samsung shares were hammered. investors weren sold out of that market on friday, about 499 million dollars worth of foreign outflows. korea off by .3%. some good movement from new zealand, australia flat despite that uptick in the oil price. let's look at the australian energy players. wti crude held about $50 for the first time since may. it has given back a little, but you can see a good rally from a
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number of the energy players in australia. beach energy up by 1.5%. some other movers, some very good first-quarter numbers come up by 7%. fortescue metals in sydney up by 4% after a broker upgrade from atp, saying the stock should hit seven dollars, 34% premium to where we are right now. toshibatill looking at come off by 3.4%, although it does look like western digital and toshiba have come to some agreement about the sale of the chip unit there. rishaad: thank you so much. right, what we have on the way, a new low, moscow expelling hundreds of u.s. diplomats. we look at the increasing strain on the trump-putin relationship. debt, theving down impact of china's deleveraging campaign on the economy.
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this is bloomberg. ♪
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♪ rishaad: you are back with bloomberg markets. i am rishaad salamat in hong kong. i am haidi lun in sydney. the latest business flash headlines. billionl announce a $2 share buyback when it releases second-quarter results today. thes the first phase of three-year program to run down the stockpile of cash. a banks spokesman declined to comment. consensus estimates are for pretax profit of $5.5 billion. rishaad: nomura profit rising 20% as the stock rally boosted commissions. in thellion, pretty much
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middle of the range of estimates. 225 has gained 20% over the past year, and one driver is nomura, up 56%. investmenttite for is surely on the rise. for stocks, but demand for foreign bonds is increasing. with the macro economy turning positive, i expect investment sentiment to improve even further. a recovery in china helps komatsu's first-quarter profit double come in net income rose 134% to $328 million for the world's number two maker of construction and mining equipment. sales rose 44%. competitors support the prospect of a turnaround in the construction sector. china's official
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factory gauge darling back a notch in july under a push by authorities to curb financial risks. manufacturing pmi 51.4. is the us in hong kong senior emerging asian economist here. let's not dwell on this. it is bang in line. what does it tell us? >> it is consistent with our view, suggesting the economy has preserved the momentum we have seen in the second quarter of this year, 6.9%. we had anticipated a slowdown in the second half, but today's emi theers suggest that momentum is well preserved as far as the manufacturing sector. rishaad: it will continue because it is a command economy ultimately. we were talking during the break
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, sometimes it seems to be absolutely foolish to talk about china until congress is out of the way. what are your thoughts? this year, the overarching objective is to maintain macro stability. it is an important year of the leadership transition. they want a macro backdrop stable and sanguine for these political events to take place. have seen the infrastructure and fiscal spending continue to play a significant role in supporting the economy. i think that is likely to continue in the second half. rishaad: right, so what will you be looking at in particular? thatwe get the reforms people are clamoring for? state-ownedabout enterprises in particular, the breakup of some of them, perhaps some of them becoming merger minded. inthere are split views
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regards to the pace of reform. if you look at capacity reduction, the deleveraging campaign, the of boschman of the one child policy, china has moved in the right direction with a lot of these reforms over recent years. financial reform is one of the bright spots. as you mentioned, the soe reform is one lacquered in the reform package. the hope by us is that after the theership's transition and top decision-makers have consolidated power, then they the other interests and spearhead reform and a forceful an accelerating pace going ford it. that is our hope. .- going forward that is our hope. haidi: not sure it will translate into policy. some headlines, the daily yuan
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fixing stronger, 6.7283 against the dollar. this stability and relative strength when it comes to the ofn giving authorities more a window to affect better reforms, a lot of this is on the back of the weakness in the dollar. we do have the dollar index falling against everything in the g-10 in the previous session. >> i think that is due to a number of things. the dollar weakness is one of the important drivers to ease off some of the pressure on the renminbi we have seen over previous years. we have to take into account internal factors playing out. thoseoc had instigated capital control measures late last year, and clearly that help to slow down capital outflows.
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the domestic economy is doing pretty well in the first half of this year. domestic interest rates have been rising on the back of this deleveraging campaign, so that helps to narrow the expansion of the interest rate between china and the u.s. and helps to keep liquidity that would otherwise want to go out within china. external and internal factors have helped to generate this stability. is your take on this clampdown when it comes to out the chaos it has unleashed when it comes to these take headline-making na, fosun, one h i that. what would prompt regulators to come down hard on them when the implications are if you come
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down too hard, it will create financial instability? the think that to me that clampdown on risky asset acquisition using the debt that has been generated internally, it is the other side of this deleveraging campaign. last 6-8 months, we have seen financial markets, financial system tightening, chinese authorities trying to squeeze out the risky part of the financial system. we know that a lot of these credit intermediaries from the shadow banking system was feeding into the real economy and helping companies make risky acquisitions globally. as you make healthy progress on the financial system tightening, the next step is to reduce the debt and reduce economic leverage in the economy, and i think that because these things are the most risky part of the
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economy that is also the first thing beijing will try to clampdown on. rishaad: the thing is you mentioned these companies, hna, anbang insurance, what is the in the game here? what are authorities in china trying to achieve? >> over the longer term, to deleverage. we think it will be -- rishaad: surely they should not have let them get in the mess they got in in the first place? >> china has gone through a wave theeregulation over financial system. shadow banking over the last couple of years has been in a rapid growth. obviously that helps to contribute to the financial part of the economy, help to contribute to the overall gdp growth. rishaad: this extends beyond shadow banking. surely this is about companies
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being acquisitive and not being in the shadows. >> shadow banking is helping to provide liquidity for these companies to make risky acquisitions overseas. what beijing is trying to do over the last couple of months ofto tighten the supply liquidities. these companies are managing the demand side of the equation, so you have to deal with both sides to make sure the deleveraging campaign is successful. rishaad: thank you very much indeed. coming up, hsbc, in the premarket, reports of a big share buyback with the cap down to those first half results as well. this is bloomberg. ♪
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♪ haidi: this is "bloomberg markets: asia." i am haidi lun in sydney. inhaad: i am rishaad salamat
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hong kong. we count you down to the start of the trading day here and shenzhen and shanghai. .2 5%, the futures contract pointing to a positive start to the day. one bellwether stock in this part of the world will be hsbc with first half results, second-quarter results, if you will. this is what we have seen from the bank since the start of the year. there you go. we are up 23%. that is what has been going on. 8195, the company expected to announce a $2 billion share ofback plan, the first phase a three-year program to run down cash piles. this all coming from the sunday times. this gives you an idea of hsbc's revenues from asia, which have come down, 57% at that stage.
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now just about 47%, 46% currently come a but even that as we see, well, nearly 12.5% revenue growth from asia, it does you that other parts of its business are doing even better than its mainstay here in asia. haidi: watching out for those earnings. speaking of bellwethers, li ka-shing, news over the weekend that a new york-based infrastructure investment group have agreed to pay $1.9 billion in cash to buy the fixed assets of li ka-shing's telecommunications business. rivals.d saying shutting the unit will allow to focus on new industry segments, including
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data centers and declining residential sales played a part. coming up, while the fangs are driving equity markets, asia has a rally apparently. this is bloomberg. ♪ these days families want to be connected 24/7.
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9:29 currently in hong kong as we count you down to the start of the trading day. premarket on the upside. hsbc with first half results later on. apple, tesla, toyota, berkshire hathaway. pmi data out of china showing momentum continues they are. set byhe mood music geopolitical issues with more than 700 diplomatic personnel to be expelled from russia. u.s. ramping up pressure on vladimir putin. later on, rba rate decision and the rbi in india.
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right, a few things on offer. haidi: that's right. so far, the data points have not been all bad. the u.s. gdp numbers just shy of expectations has did china pmi. we will get the private gauge on manufacturing data as well. say, the rba with a 0.3% chance of a hike, 0% probability of a cut there. we are looking ahead to guidance as it were when it comes to the strength of the aussie dollar. shanghai, hong kong let's get over to juliet. we are seeing upside from the shanghai composite. , .6% gain. the hang seng index continuing to rally, up by .3%. it was in the red for one session out of five last week.
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you still have momentum and a lot of these property stocks. he hang seng above that 27,000 point level. weakness from the nikkei. slightly's asx 200 higher, up by .2 5%, so a mixed start to the trading session so far. what we can see when we look at the function on the bloomberg imap is the strong rally in energy players. the firstove $50 for time since may ahead of the opec inting, members conference new york. we have mining stocks looking good, up by .7%, and some money coming back into tech players hit hard on friday. 3%, so upside from those i.t. stocks. weakness in consumer staples, off .9%.
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currencies,t the japan industrial production coming through better than expected, a strong rebound in june, 1.6% in the month from may. the yen looking good against the dollar. have a look at the korean won, the worst-performing asian currency against the dollar. this as we see weakness from the kospi. foreign outflows from that market on friday having an impact on the south korean won today. rishaad: thanks a lot for that. let's get you up to speed with first word news headlines. ♪ haslinda: police and demonstrators have clashed has been this way the holds a contentious vote on remaking the constitution. at least six people killed as violence flared across the country.
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maduro's opponents are boycotting the polls, saying he was to curtail decades of democracy. president maduro has faced international condemnations and the u.s. is considering sanctions. in abuducers to meet in qata dhabi to discuss curbs and outputs. overall compliance with restrictions fell to 78% in june after members including saudi arabia boosted output. oil had its best week last week amid signs the market is rebalancing. wells fargo has a new problem following fraudulent bank accounts and bogus credit cards that compromised customer data, now unwanted auto insurance. the bank may have charge more --n 500 million people 500,000 people for insurance it did not need. it told investors about the changes, but not about the
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insurance issue, which they had known about since july last year. house republican leaders say scrapping the plan for a border tax will make it more likely they can overhaul the wider u.s. tax code by year end. speaker paul ryan rejected raising taxes on wealthy americans and missing he supports a top rate of 35%. white house chief strategist is said to back raising the top rate to 44% to pay for middle-class tax cuts. global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. rishaad: stocks in asia has been enjoying the strongest rally in five years, and unlike the s&p 500, there is more than technology driving it. the market has more than one leg to stand on. let's bring in our gadfly columnist. the asian rally is more resilient than the u.s.
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what gives? has technologyia companies that have contributed to 30% of the run of asian stocks, but unlike the u.s., financial companies seem to be picking up as well. we have seen positive or earnings revisions for the financial companies in the last month, and we are still at the early stage of earnings reporting season, but so far it does not look too bad. haidi: what about asia? we're talking about financial companies as well, so how is the report card so far this earnings the season? >> we have korean banks reporting already. expectations for korean banks are not high. that is why the korean banks have been beating earnings. last week, we found out chinese real estate companies could
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report good earnings this season as well. grand said the prophet could have tripled from a year ago, so optimistic. sense thathere a this is because we are coming off a lopez and low expectations? >> that's correct. which is fine, right? the valuation for financial companies are not high. haidi: thank you so much for that. so, manager expectations. >> haidi: yes. haidi:bond traders bracing for what is a fairly pedestrian event on wednesday, but this being the year of the great unwind of the balance sheet, we are looking more carefully at treasuries refunding announcement. this is a big buyer of u.s. lawns getting ready to buy less.
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to our global economics and policy editor kathleen hays in new york to connect the dots. what could you be talking about? >> it is a big buyer called the federal reserve. the fed has a $4.5 trillion balance sheet and it is getting ready to not continue to all ofesting those securities back into its portfolio. it will let some of them run off. meanwhile, every quarter has a refunding, and let me remind you what that is. once a quarter, it refunds of securities to keep debt at a certain level. maturing.lways it just has to issue more to replace them. is reportedly refunding three-year, 10 year, and 30 year bonds. short, longer, and very long end of the curve. what is happening? highere losing a big
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because the fed has made it clear it has a plan to let $10 billion of securities run off and not replace them. $16 and treasuries, $4 billion in mortgage backed securities. every quarter when the treasury is getting ready to announce its refunding, it talks to primary dealers and asks about the conditions of the market and investor appetite come as a now people are wondering whether the fed will buy yes so maybe we should change the issuance and sell more three-year bonds or 30 year bonds. steven mnuchin and has talked about extending the maturity of the treasury debt. if the 10-year note is at two point 25% or the 30 year under 3%, why not sell more long-term debt? you will make the financing of your deficit lower over time. bondis in the mix and some traders are saying it could cause market volatility. let's keep one foot on the floor for some perspective here.
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the fed is not expected to make its announcement until september, and the change and balance sheet procedures would not start until i told her, so people are saying you were not here of any change until the november refunding announcement. we have a jobs report of friday, personal income and spending the fed'sich contains key inflation gauge, which has been falling short. for this week, people say that is the big focus. the treasury department might have some sentence in there that gives the bond traders going. rishaad: where is the fed now? gdp not as strong as an to anticipated, and that all-important jobs report coming up. butt did miss forecasts, basically you have the fed after
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this rebound from the first quarter looking at an economy going at a slow, plodding pace. it is not exciting, but u.s. gdp 1.2% in the versus first quarter, so on track and then some. the consumer was the big part, btv 7965, jump into the bloomberg with me and let's look at the far right hand side of is screen, that dip down 1.9% consumer spending in the first quarter. it was a big revision higher. 2.8% in the up to second quarter, so the consumer stepped up. investment looking healthy. that has been a big plus. trade, more experts also helping -- exports also helping. the fed expect gdp to grow 2.2% over the course of 2017. for the first half, gdp grew 1.9%.
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that 2.2%o hit target, it has to grow 2.5% in the second half. some economists say this will happen, some say that is a stretch. the latest report has a look at the pce core deflator come a key inflation gauge of 0.9%. that is what we have been watching, a slowdown in the pce deflator. even so, the fed is still seen on track for unwinding the balance sheet later in the year and one more interest rate in the year because the economy is still on track. also, the reacceleration may give the fed hope that as gdp paid except, inflation will pick up again come a so as we wait for the jobs report, the fed has a firmer footing when it comes to the gdp number. rishaad: thanks a lot for that. coming up, we look ahead to other central banks looking at rate decisions from the r.b.i. and rbi, assessing the outlook
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for asian equities with fountainhead partners. that is coming your way next. this is bloomberg. ♪
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♪ rishaad: you are back with bloomberg markets. i am rishaad salamat in hong kong. i am haidi lun in sydney. a check of the business flash headlines. a chinese energy company after it expects first-half profit to double. this on the back of higher prices and sales times. net income should rise 143% from 2.9 billion to dollars come exceeding the whole of 2016's total, the first profit in four years. cutting 70lls fargo
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senior executive positions at its community bank hot on the heels of this fake account scandal. the number of regional presidents will fall to 91, with those affected remaining on steps for 60 days. wells fargo was fined $158 million over accounts opened without customers permission. warner bros. epic dunkirk held onto the top spot. collecting $28 million, taking total receipts about $100 million. it held off the debut from sellinghe emoji movie, $26 million, but was almost universally panned by critics. it suffered badly from bad reviews and social media sentiment. asian equities and joined the strongest rally in
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five years, technology soaring 35% so far this year, surely this can't go on. let's ask a founding partner of the advisory firm fountainhead partners. well, can it? >> i think there is still some room to go up because -- rishaad: the valuations are so cheap when you look at the broad-based index. 16,hang seng 14 times, csi korea has been fantastic. >> an excellent performance by the korean stock market. overall, the economic recovery will continue. china will stay in one piece. that is good news. big and 2016, all the pullback is due to china, reform, whatever, pulled the market back. today, china's economic numbers look intact. rishaad: the china story in
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tact, but it is about this congress coming up and how that can affect things. what are you looking for? will it be something that materializes which is tangible and proof positive for investors? >> the u.s. or china? rishaad: china. >> the 19th party congress, the announcements, policy, and so on, it looks like it will be more positive direction. more reforms and so on, so it looks like on the positive side. rishaad: when you say the u.s. is interesting, because you can confuse the two quite happily, 19th party congress, congress, and also a lack of tangible reforms or fiscal stimulus even. china is moving
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in the right direction in the longer term but u.s. politics is getting worse. if you look at president trump's problem with his staff and also the policy, looks like nothing has been achieved so far. i don't know. the economic front, it looks like the u.s. economy will continue to recover if you look at second-quarter gdp. it is good. wage inflation is moderate. corporate earnings are decent. there were a couple of disappointments like amazon and goode, but a lot was quite from the banking sector, so there is for the room to go up i think. arguably, clearly the trump part of the u.s. rally, the trump trade, has unraveled. we are not expecting policies to push through. it sounds like a chaos in the white house at the moment.
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does the next leg come from a cautious fed and a lower rate longer type in ferment that will push stocks up further and further? >> absolutely. we are not overweight on the u.s.. in marketsweight like europe, japan, and a bit of china. the u.s., we think violation's are overstretched. plus, we discussed the uncertain politics front. nevertheless, we are still positioned risk on. we believe so far are that we have not seen any significant orks from property bubble some kind of china hard landing. does not look like it will happen, so we are still risk on and are hoping the market can
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continue to rally a bit. of the flag bearers when it comes to this asian emerging markets story is starting to look shaky, a note from credit suisse saying when it comes to korea, you are starting to see earnings estimates turned negative -- turned negative, same with malaysia and the philippines, outlooks are down and analyst saying unless you get upgrades soon come it will be hard for the market to push higher. to be selective, what are you liking in asia now? >> well, obviously the philippine market has been overstretched. we do like korea. it is ok, but the earnings side might have a bit of kobach or volatility, but nonetheless given the global macro environment that continues to be supportive. side, dollar is on the
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emerging markets would do better, so we see china's gdp number is better and we see government is deleveraging. this is all on the positive side. overall, sentiment plus the valuation on emerging markets is much more supportive compared with some of the markets like the u.s. equity market, which is more stretched. this appointment will not derail the overall rally of emerging markets. point that's a very good if you put it into perspective. everything is looking stretched, stst looking for the lea stretched markets. thank you for that. all right, up next, we are looking at geopolitics, strained
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relations, moscow hitting back over this sanctions that, hundreds of diplomats ordered out of the country. we will have analysis next. this is bloomberg. ♪
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rishaad: russia fighting back over sanctions, china catching flak over north korea, lots for remy innocence you to explain. russia, and moscow saying since you are throwing new sanctions at does, we are throwing your diplomats out. cutia has told the u.s. to 755 staff from its embassy and three console and's would leave 455 employees, the same number russia has in the u.s.. for thein retaliation near unanimous vote in congress that would make it harder for donald trump to undo any sanctions aimed at russia.
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the white house is indicated mr. trump will sign that bill. president vladimir putin on state tv said he hoped bilateral relations would improve under donald trump come of it now expects that "won't be soon."'s deputy foreign minister double down on a sunday morning talk show in the u.s.. >> this retaliation is long overdue. if the u.s. side decides to move further towards further deterioration, we will answer and respond in kind. we won't mirror this pit we will retaliate. they. putin added that could banned the import of u.s. consumer goods. russia is the u.s. third biggest trading partner, but it is an option. also, fallout after north from's latest icbm test friday, and donald trump fired off a fresh round of tweets and the china. he said "i am very disappointed in china.
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they do nothing for us with north korea, just talk. this tono longer allow continue. china could easily solve this problem." that could include trade and economic pressure, especially since diplomatic pressure seems to be the least useful tool in the shed. hop into my bloomberg, this is the country's trade flow with other partners. china is north korea's biggest trading partner at $6 billion in 2016, but in the past two quarters, that has fallen by $500 million since china ended coal shipments. president xi jinping did not address donald trump's twitter criticism, but did tell troops that "the world is not safe at this moment. a strong army is needed now more than ever are co- -- ever." he is looking to project stability at its upcoming leadership reorganization where he and
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tends to solidify his power. remy inocencio, bloomberg, new york. rishaad: coming up, we discuss all of that in more detail and are headed to seoul, korea. ♪
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♪ is 10:00 on a sunday evening on the eastern seaboard of the united states. resilience is awarded as global stocks in norway rally. there headed for the ninth straight monthly gain. gaugeficial factory showing a notch in july, although they performed better than anticipated in the first half. haidi: i am in sydney. aboutoming up, hsbc do later this hour. -- due out later this hour. they have a renewed focus on asia. this is "bloomberg markets:
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asia." ♪ haidi: midnight strength -- renewed strength, steady as they go. the official pmi gauge for manufacturing, 51.4, 51.5 for services. still in a expansionary smallery, but private companies often have a fund-raising issues, or funding issues, i should figured looking ahead, it is about the aussie dollar. we have a decision on tuesday. no expectation for a move either way, but given the way it has been sitting just shy of it he sends -- take a look at the stop -- just shy of $.80.
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take a look at the stock. they had been repeatedly saying that the aussie dollar should be more, there would be comfort to create more competitiveness for exports but it has not been happening. a lot of that has been on the back of the u.s. dollar weakness. if you look at the trade weighted basket, the aussie is showing strength. the spot rate, at about it either. the forecast for the fourth quarter is at 75. plenty of analysts are saying $.80 will be quite sticky. some are saying that $.85 is possible by the end of the year. rishaad: also talking about banks numbers later on. earnings season continues. kyoto later this week and apple, as well.
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geopolitical is also setting the tone. we have the 700 embassy, somatic officials being expelled officially -- expelled essentially out of russia. as well as north korea very much in play. have -- has a look at this. still prices is probably the biggest mover at the moment. juliette: and also the oil contract in singapore. it is about 4%. seeing some big rallies for commodity producers. that the london copper contract is trailing at a two-year high. citigroup is saying they are rallying. knows a price, you momentum comes through from a lot of these commodity-based markets. new zealand, australia both up. the nikkei is flat as is singapore. you also mentioned hsbc earnings
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coming through today. we're seeing a lot of upside coming through from the hang seng. it had a great rally over the course of the last week. friday was the only day we saw hong kong stocks in the red, as we saw profit taking come through. it is pretty much reversing everything aloft on friday. good really coming through once again am tencent, one of the best performers in terms of index points in the region and the hong kong hang seng holding at about 27,000 points. we will see what impact hsbc has when it comes through with its results, normally around the lunch break. having a look at other players, steel is up. earnings were playing through into asia, as well. rising not only on this rally in commodities, but a broker upgrade. we are seeing toshiba still under rusher -- under pressure.
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we've heard that toshiba and western digital have come to an agreement of sorts over the chip is nested -- ship business. we have been talking about the rally in the oil contract, about $50 per barrel and nudging into the asian session. this index appears to have rallied well, but the s&p 500 in the u.s. has had a little bit of a folder in its rally. er in its rally. rishaad: thanks. resilience is the word. i will tell you why as we get the first word news. china factories slowed moderate in july, and officials say they are putting the pmi figure at 51 point four, down from 51.7.
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slowdown isays the due to hot weather. the secretary remains confident that they can deliver fast growth. nonmanufacturing pmi was 54.5 in july, also slightly lower than june. the u.s. military have staged a show of force in korea, showing some -- sending some bombers across the country. they flew in from guam in response to the latest missile launch by north korea. the whole of the u.s. is in range of the icbms from north korea. russia has told the u.s. to reduce the number of embassy staff across the country by 755 people by september 1, following the new sanctions agreed by congress. that would be more than half of the arsenal and would lower the total to 455, the same number
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russia has a u.s.. wouldent putin said he refrain from further measures but his administration warned it would act if necessary. >> this retaliation is long overdue. if the u.s. side the sites to move further toward further deterioration, we will respond in kind. we will mirror this, we will retaliate. >> japan's factory -- factory output rebounded in june. industrial reduction increased 1.6% in may. measured year on year, production was up almost 5%. level demand and a weak yen has helped exporters. some unity in -- over brexit did not last.
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consensus was forming around a three-year transition phase during which littlewood change in the -- little would change in the uk's relationship to the eu. beenfox said he is involved in no such discussions. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. ♪ citigroup is among those expecting hsbc to announce whether they are going to have another share buyback. the results are later monday, there is also likely going to be renewed focus of what is going on in this part of the world. we have our china finance editor. we were talking about pmi, you were saying it is resilient, but it seems this phrase can be extended to what is happening with the likes of hsbc.
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what are the underlying factors? hsbc is financially a lot stronger than it was a year ago. i think the analyst we are talking to, they are saying it will be strong again this quarter, brokerage and wealth management revenue, loans, there is a fence things are kind of on track and asia. -- in asia. rishaad: i want to bring up a chart. -- can weows us is have it on? what we do see is from december , 55% of totalasia revenues. this is down to about 27% now. time, growth is 12% in terms of the revenue coming out of asia. that suggests the whole pie is getting bigger for the bank. paul: i think one of the focuses
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in earnings today will be the push into the delta that hsbc is undertaking, more flavor on that and more of a sense that this overall strategy of the big asia putsch -- asia push, more detail on how that is going. i don't think that is going to change, we are not going to see a strategic shift today. hsbc is coming up for a leadership change, they will have a new chairman since. formally paul: that is right. this will be all about seeing how they are performing on the existing parameters as opposed to any big surprises in terms of the asia push. haidi: overall, the bank is looking stronger than what we covered a year ago. isit fair to say that this
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looking for resilience and no nasty surprises this quarter? yes, and theaul: shared buyback, there was an unsourced report estimating a $2 billion buyback in the second half. there have been some very big estimates for buybacks. 4 billion in the second half and another 4 billion next year. ago the coreear capital for hsbc, that core measure of financial strength was down around 12%. this time i think the consensus is we will come up with something like 14.4%. so we got the wherewithal and we know they have passed the fed stress test in june, which really sent shares on a surge,
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that's indication they had more money than the -- that they could return. know morenks, we will in a couple of hours time. japanese turnp, on the one shake ball -- once unshakable abe. rishaad: the u.s. and china wage a war of four over north korea. we have analysis. ♪
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♪ i am rishaad salaam in hong kong. haidi: and i am haidi lun in sydney. the captioning has agreed to sell the assets of its hong kong
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television -- telecommute and business. we are told they beat out rival bidders which have been preparing financing for an offer. global communications the selling assets to focus on new industry sectors. shares in the telecoms unit are trading up today. that's rising more than 20% as a stock rally boosted a brokerage commission and offset a drop in trading. that was smack bang in the middle of the range of analyst estimates. the nikkei 225 topping 20,000 during the quarter for the first time in 18 months. it has gained 21% over the past year. number is up 56%. -- theeed the appetite
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appetite for investment is surely on the rise, not only for stocks but demand for foreign bonds is increasing. with the macro economy turning more positive, i expect investor sentiment to improve further. haidi: a recovery in china tsu to come up to -- koma rise in the first quarter. they are the world's number two maker of construction and mining equipment. results from competitors support the prospect of a turnaround in the construction sector. ishaad: now, geopolitics, it north korea once again. the latest missile launch rating mistakes in washington and prompting donald trump to staging show of force in reply. the sent two bombers over peninsula. concern.mitted is it a rapidly escalating
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problem or a game being played? -- let us getthe to the author of "the real north korea." what is really happening here? what does kim jong-un want? >> he wants security. he knows he can face a domestic revolution that has happened in many countries in the middle east. he wants to be secure he will level -- will never get that. believes that the basic and only condition to ensure his survival is capability to deliver a nuclear warhead to the continental united states. he said he would do it. donald trump said he would never be allowed to do so. we see that kim jong-un was
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right. he has just done it. he demonstrated a capability of reaching new york city and killing a lot of people if it is his decision. rishaad: should we believe him? well, using the available technical intelligence, he has a missile capable of reaching the united states. it is also well-known he has nuclear warheads. it is not as clear whether his nuclear devices are small enough to be installed onto the missiles. that is a question. but it is a small one. majority of experts believe he definitely has missiles, he definitely has nuclear weapons, so most likely he has both compatible, he has some weapon
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systems capable of hitting the united states or perhaps will have it in the near future. haidi: what is the best way to engage and to deal with pyongyang? there was talking about readiness for the leaders to me, that things -- that seems unlikely. what can be done to deescalate? andrei: it is not quite clear where it has been an escalation to start with. for north korea, it is business as usual. they have been absolutely frank that -- frank about what they want to achieve. they finally achieved it. most of the escalation was exchanging meaningless rhetoric. tos is what i would expect see in the next few weeks. america says, we will never , russia promises some support that will never arrive. will make angry
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statements and north koreans will say, we are great and we don't care. we have seen a sony times and will see it again. if you are asking me what is the solution, what is the goal? as long as the kim regime stays in power, and they are likely to for a long time, democratic cratizationdemo is not possible. the question whether an american demonstration is willing to negotiate a deal that can be presented in a sort of like playing a blackmailer. at any rate, it will not happen anytime soon. i would expect to see a great deal of meaningless actions. it just makes americans and
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south koreans feel better, nothing else. but we will see a lot of gestures. from pyongyang, business as usual. haidi: what can china actually do? president trump keeps calling not doingg for enough, keeps threatening to retaliate on the trade front for china not doing enough. isn't there an argument that beijing and doesn't have the leverage it likes to pretend it has? diplomat south korean recently made a wonderful joke privately. leverage, it have has a hammer. china cannot influence north korean influence, what china can do is deliver a nearly mortal blow to the north korean economy
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by refusing economic exchanges. this is what china can do. but it is likely to be a messy economic collapse of the north korean economy and political instability. it is a big question whether the north korean government, facing such instability, will agree to surrender its nuclear weapons. probably not. choices.ces giving up weapons that stable, or civil war. china has no interest in the second option. anyaad: do they really have interest in doing anything but maintaining the status quo? well, of course china is
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a power. they would like to do something to reduce the north korean nuclear potential. keeping the status quo is far more significant for china then dealing with north korean nuclearization. rishaad: thank you so much. buybacks in hong kong. on are companies going record repurchasing sprays? -- sprees? we will tell you why. this is bloomberg. ♪
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♪ withad: you are back "bloomberg markets." companies are spending $1.2 billion on the run shares in hong kong this year. why is this going on now? >> hong kong stocks are doing so
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well, what you need to buy back your own shares? indexith the hang seng rally in, only three companies accounted for half of its gains. rishaad: 20% of so far this year you'd just enough -- maybe my shares are undervalued. he also think that hong kong countries are really enjoying it looks like the twilight of their record low interest rates, which makes it a good time to find buybacks. haidi: is this just a hong kong phenomenon? how does it compare to u.s. companies over the past year? justina: we've all heard about the buyback boom in the u.s., and hong kong was nothing compared to the u.s. they saw 550 billion of buybacks in 2016. think we might be seeing similar conditions here. in the u.s., with all buybacks
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taking off along with america after the crisis. interest rates started to rise in 2015. it is possible we might see something similar in hong kong because, as we all know, they're mulling -- there monetary policy is tied to the u.s.. it could have an impact on buybacks. haidi: quickly, how are investors in hong kong taking all of this? justina: it is always the good news to have another buyer in the market, and in this case it is the companies themselves. if you want to be a pessimist, there is also cause for concern because as a lot of people have pointed out in the u.s., this means the companies are not spending on their businesses. you can look at the real estate sector in hong kong, which accounted for a bulk of buybacks this year. rishaad: good stuff, thank you
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very much for that. economyp, china's touching the brink. we look at headline numbers.
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♪ it is 10:29 in singapore. haslinda: police and demonstrators have clashed has venezuela holds a contentious vote on remaking the constitution. six people reported killed. president medeiros opponents are boycotting, saying he wants to curb decades of democracy. president maduro has faced condemnation as the u.s. is considering sanctions. opec an independent producers to meet in abu dhabi to discuss compliance with cuts and output. fell to 78%liance
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in june after members, including saudi arabia, boosted output. week last weekt amid signs of rebalancing. wells fargo has a new problem following fraudulent bank accounts, bogus credit cards, and optimize customer data. it has emerged the bank may have charge more than half a million people for insurance they did not need. in may, executives told investors about the changes they were introducing, but not about the insurance issue that they have known about since july last year. house republican leaders say scrapping plans for a border tax will make it likely they can overhaul the wider u.s. tax code by year end. speaker paul ryan rejected raising taxes on wealthy americans, saying he supports a top rate of 35%. steve bannon is said to have backed raising the top rate of
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44% to pay for middle-class tax cuts. global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. haidi: thanks for that. onrting off the trading week an uncertain note. we are waiting for more indicators set of china, the private caixin gauge up this week as well. we have the central bank decision out of australia, and digesting that u.s. gdp number and implications for fed policy. you get the feeling is that if we get a downturn we could see protection for this -- correction for this emerging market rally. tohaad: looking forward toyota and apple later this week. geopolitics playing a role, but
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i look at the market action thus far. >> yes, we are seeing a strong rally from the raw materials players. the surge in copper holding at a ironear high, singapore ore futures rising. strong support from bhp billiton , also japanese steelmakers as well. uprgy players looking good, .4% as wti and crude nudge towards $50 a barrel after reaching the level over the weekend. a downturn from some consumer staples stocks. i.t. stocks helping the overall regional index. a strong rally from the hong kong hang seng index gaining everything is lost on friday, up 200 upnts, the s&p asx
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by .3%, so those gains helping to claw back some losses. it is flat after the lunch break on the nikkei index. shanghai in copper, copper futures up 1.5% in asia, but a big surge on the lme. we have copper at a 26 month high. le raising its forecast for next year, and citigroup saying that copper rally will continue, saying it is china-driven. let's look at some of the movers in the region. tencent and samsung electronics lifting the overall regional index even though the kospi is flat. back to percent after losing 3.5% on friday. tencent above $300 a share. japan one upside in
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the back of strong earnings at the end of last week. to the downside, japanese companies,export toshiba under pressure, falling as we hear more detail about the deal with western digital over the chip unit. they have agreed in principle to give each other two weeks notice on the sale of that unit. officialright, this back amiduge dialing a crackdown on financial risks. tom mackenzie is in beijing. give us the details. tom: nothing to shocking. number four july, the pmi manufacturing number missing marginally the estimates we had from economists who had , down from the june number that surprise to the upside, 51.7. if you break down some of the
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components that make up this index, construction, that sub index up marginally from the june number, but new orders were in the slightly lower than you manufacturing sector. the nonmanufacturing service sector came in slightly below the june number. for july, 54.5ay for the nonmanufacturing pmi number. as you mentioned, we have the caixin index tomorrow mo focusing on smaller businesses. the leading indicators leading up to these numbers this morning suggested it would be relatively robust. that is in terms of the expansion in the manufacturing sector. the sales manager index at come up to a more than two-year high. metals prices also higher.
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these numbers suggest the momentum into the second half is still growth, possibly cooling to some degree, but no major red flags at this stage of least. pmi leading indicator obviously, so what does that tell us about the overall growth story for china in the second half? tom: just parsing some of the comments we have heard today so far reacting to this number, the consensus seems to be we will get slightly slower growth in the second half, some more sanguine than others, some more updated and others. we heard from one chief emerging market economist who gave this reaction speaking earlier. had anticipated a slowdown in the second half, but today's pmi numbers suggest the momentum is well preserved in the economy. tom: we also heard from standard
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chartered, saying they expect growth momentum to slow gradually in the second half. australia and new zealand banking or economists expect a new orders to soften. they expect that softening to continue in the second half here it the overall context is that exports have surprise to the upside with greater global demand and domestic demand. we have had that fiscal policy, the ratios ofge, spending on things like rail and roads has a ratio to overall investment is at its highest level since the financial crisis of 2009. bloomberg intelligence warning that it is kicking the can down the road in creating stability, but these financial risks associated with infrastructure spending will have to be dealt
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with further down the line. in terms of the pboc response, we saw money market rates were edged up by the pboc. and futureapped that risks. in terms of the credit cycle downturn, that will kick in towards the end of this year, and there will be continued pressure from the real estate sector. so far, no big shots this year in china, but second-tier cities and third tear cities have been resilient. cooled major cities have come up and pressure likely on the property sector, and that could prove a track on the manufacturing sector going forward. the party congress towards the end of this year in the mix and the desire from policymakers for stability, which they seem to have at this stage of least. haidi: all leading up to the 19th party congress. tom mackenzie there in beijing
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breaking down the latest factory indicators out of china. mounting back to tensions between the u.s. and north korea. japan working alongside that u.s. and south korea to develop stricter measures against kim jong-un following the test of another icbm. let's get it over to isabel reynolds. what has been prime minister abe's response? >> japan has developed a standard response to these incidents, but there has been a change this morning. prime minister abe was talking to president trump, and singled china that conversation and russia as having failed to provide enough pressure and urged them to put more pressure on north korea to prevent future incidents. last week, japan introduced to chinesen
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organizations which are believed to have connections with north korea. it will be interesting to see how this plays out in terms of the relationship between japan and china, which has been difficult for a long time, but is important in economic terms. his power base, popularity ratings, have fallen spectacularly. he is expected to shuffle his this week. is he running for cover? what is behind it? >> he has to be seen doing something in response to this massive fall in approval ratings in response to a series of scandals involving the prime minister himself and members of his cabinet. he does need to replace some of those people in his. one step down last week, the defense minister, but there are others who have had issues over the past few months and will be
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replaced. on the other hand, he cannot take a huge risk in appointing new people also analysts are saying he may bring back people who have served in the cabinet in the past and a reliable and scandal-free. rishaad: right, well, the opposition party leader also stepping down. it all seems to be a colossal mess there at the moment. in come i don't think i have seen anything in recent years to compare with this with such a mess in the ruling and opposition parties. it is a mystery why the leader of the opposition told this toent -- chose this moment step down. she has failed to bolster popularity, even though she herself has been a popular politician as an individual, so perhaps that is the reason. we will be looking at a new election for a new leader of the opposition shortly. affect is prime
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minister abe's decision on when to hold the next general election. if he sees the opposition is in disarray, he may choose an earlier election because there is no one to compete against him. governor, the tokyo who is thinking about a national party, and before she gets her act together, he might choose to go to the people. rishaad: great stuff. isabel reynolds in tokyo. coming up, is the next leg of the emerging bond market rally about to start. that is next. this is bloomberg. ♪
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♪ aidi: the bond market gearing up for a refunding announcement. it could spark a wild ride.
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boosteasury expects to issuance as the fed begins to parent down its balance sheet. let's head over to singapore. not an event we would pay attention to, but closely fixated this week. are you expecting volatility when it comes to that yield curve? >> thank you. now we are in a situation where central-bank policy in arope and the u.s. is on predictable course, well communicated, gradual. i don't expect emerging markets and bonds and currencies to be roiled by this treasury announcement, refunding announcement. we have seen treasuries in a range, even if they go up higher, they are accompanied by solid fundamentals.
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the global economy is picking up slightly. not too much to cause central banks to indicate they will have to accelerate tightening. everything seems to be gradual and encores. china is growing well. all these combined well for emerging markets and asian bonds in general. you see further opportunities when it comes to the high-yield areas, local lawns in the emerging markets space. that is on the assumption you get a cautious pace of normalization across to-three. -- g-three. >> yes, that it moment where government bond yields will not do much, investors have to look for yields elsewhere. we are not seeing any signs of increased volatility. if we look at indices in the equity markets, volatility in
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the u.s. treasury bond market, it is all very quiet. currency markets are quite as well, so this type of environment in the middle of the summer where investors are carry, and higher-yielding bonds do benefit from these types of flows we have seen in the past couple of weeks. rishaad: indeed this is typical summer, isn't it? what will we get in the all-time? >> well, that is the question. typically september always becomes less stable. we do have jackson hole coming up in a few weeks. we have also expectations around a change at the fed helm, who yellen?ceed janet that will be a topic for september and october, so there are some causes for worry.
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right now, stable factors remain china until the fall meeting. we don't expect anything significant to happen in china in terms of the macro situation. in other major countries as well , things are generally stable. inflation is also extremely stable and low, below target, but coming into fall, some of those factors the fed alluded to such as mobile phone pricing, etc., could start reversing and we could see an upswing in the inflation numbers, which could get markets some jitters. into september, october, that is when we should become more concerned. rishaad: and of course this dollar moved to the down side surprise a lot of people. does it have more legs? >> they tend to have fairly long cycles, and this one is only six
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months old, so i think it does have more legs. quick, but hasen we remember following the u.s. presidential election, we did see the dollar move up sharply, so we have reversed that. it is a question of relative growth. ,he u.s. is roughly stable recovered a bit, but not accelerating, where as other countries such as the european region and japan are recovering faster, so that does help debt currencies, and i do think the ,ollar can continue to weaken perhaps a slightly slower pace than what we have seen recently. rishaad: one of the things you note is we keep talking about this party congress in beijing. to the other side to see what policy changes will emerge. do you think markets are underpricing some seismic
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changes, and if so, what could they look like? well, it is always difficult for the markets to anticipate beyond such a big event such as a party congress. for the time being, everything is done to keep stability and the chinese financial system and in the chinese economy in general, but once that is passed , perhaps the leadership will have some options in terms of reforms. there are some reforms which we eear about in terms of so reforms, policy reforms. some of those could be implemented and increased volatility in some of the sack errors, so that is important. is willbig question china keep its growth target where it is or will it abandoned the growth target and moved like
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other countries to just managing the cycle? they could also reduce its growth target. it should have an impact on emerging markets as well. so those are the types of changes after the party congress. what is tell me about happening in china with a lot of these companies under the pretext of them being forced to pay off their debts, deleverage in other words. how does that work out for corporate lawns, not just the ones issued in china, but these sum bonds around the world? >> generally if you look around , the corporate spreads have come in on this low volatility in the hunt for yield, so there has been a demand for yield, which has been an important factor in the markets right now. the credit quality has deteriorated slightly, it has
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been offset by higher liquidity, so you would need to see a change in both the quality of the issuance to worsen and demand dry out. one of the causes could be the ecb's tapering of its policy, buying european corporate lawns, which forces european investors to buy u.s. corporate bonds, and they have bought emerging and a-share in return. as they start to unwind, that light have an impact on corporate lawns more generally. in terms of china, we have seen a widening in spreads, and that has started to reverse. a pleasureways talking to you. thank you so much. let's tell you what we have on the way. l is not afraid to use when launching a product. we have report on tesla's new model three. this is bloomberg. ♪
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♪ haidi: tesla has emerged as a leader in the electric car race with the launch of the model three, dubbed the new benchmark for affordable electric autos starting at $35,000. emily chang was at the launch. >> the big challenge will be keeping up with the demand. the model three was unveiled two ype last year with a
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base price tag of $35,000. elon musk has reaffirmed he will be churning out 20,000 model threes per month by the end of the year, 50,000 a month by the end of next year, but even elon ish task.s a hell >> basically we will be in production hell. welcome to production hell. [inaudible] longer, iths maybe invite you to join hell. if you are going through hell, keep going. >> it may well be the most daring feat yet, but will it be another electric car or a car that would change the future of all cars?
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right, well, david is here. bloomberg markets continues. >> you guys talked about the buyback in hong kong, so we will have the chairman and chief investment does , theyewers will find out will feel his presence on tv in about 10 minutes. , thatk, hsbc earnings interview had 11:10 hong kong. hsbc top of the next hour. looking for to that. this is bloomberg. ♪ -- looking forward to that. this is bloomberg. ♪
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david: it is almost 11:00 in hong kong. i am david ingles. there in the middle of first trading day of the week, last one of the month. to "bloomberg markets: asia." ♪ hsbc rising in hong kong next of results in the hour, a buyback and a new focus. word, globalthe stocks extend the rally, a ninth straight monthly gain. when you look at china, recent be optimistic.
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the economy did perform better than expected when you look at the entire first half of the year. across markets this monday, midday, let's get it over for an update on markets. >> we are seeing a good start to numberding week from a of key markets, including hong kong. we are waiting for the hsbc result. the hang seng gaining everything it lost on friday. friday was the only session where you saw weakness in hong kong stock. tencent coming back, supporting the overall index, and a rally from developer players. new zealand looking good, up .5%, and australia up as well as we see a rally commodities players. copper holding at two-year
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highs. city saying the copper rally will continue, oil nudging $50 a barrel. in singapore, the iron ore contracts surging. we are also seeing steel looking good. i want to take it back to hong kong. the hsbciting for result, which will have a impact on the overall index. what a great month for hong kong stocks, the best rally since investorster chinese continue to pile into the cities stocks. among some of the best performers. hong kong stocks have risen every month so far this year, so july will be no exception. in the terms of the daily moves, some good results coming through. beating, up 6.7%.
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fortescue in sydney a standout, 4.6%. , one at af upgrades 34% premium to where fortescue close on friday. kospiuth korean continuing to fall, outflows leaving the market. the tokyo session on the lunch break at the moment, even though we did see news in terms of western digital and toshiba coming to some agreement over the sale of the chip unit. there we talked about how was no interest in a softbank proposal to buy sprint. is said to plan a
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direct offer for charter. is according to people familiar with the matter. preparing an offer through softbank for charter communications. said its back, charter had no interest in softbank's proposal to buy sprint. it is the cable giant with a good relationship with verizon. that is one part, but this takes us up one level with softbank occurring of direct offer for charter communications. when get any reaction tokyo markets reopened in 20 or so minutes now, we will see. hsbc.p stories this hour, next hour, earnings coming out. it is a heavily weighted stock in hong kong. have a look at my bloomberg chart. when you talk about the rally in hong kong, a few big stocks.
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, hsbc. what you are looking at, the top handle the stock prices in blue. the yellow is the 12 month consensus target for stocks if you take the average of the street, about 71. we are currently trading at 77 at the moment. in other words, the rally has blown past where the street thinks it should be in 12 months. do we get a correction back or do the earnings come through and support a lot of these analysts upgrading their view? the bottom panel showing the difference between the two, a fairly wide margin right now. focus ahead of that report. we are joined by a senior banking analysts. there are lots of things to talk about with hsbc. what should we focus on? >> i think most investors are
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focusing on their capital deployment plans and share buyback plans. far bringingn so back $3.5 billion in shares over the past 12 months. the street has been expecting them to do so after the u.s. federal reserve approve their capital plans in june. i think at least $2 billion is what is expected. david: we are looking at the buyback plan. a two 09 on your bloomberg, this is the chart from a bloomberg news story. we have polished it up so it stands out. where those buybacks were announced. in first was $2.5 billion 2016. the second round was announced earlier this year. if you put them together, $3.5 billion.
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it is not the stock price. it is the consensus rating, so when you average out buys, sell,, we are at 3.27. five being the most bullish, so they really like it. as you mentioned, perhaps we might get another round later on. we had a report in the sunday times it could be another $2 billion. apart from the buyback, is there anything else we should be focused on? focusiously people will on revenue trends. the consensus is growth of 3%, 4% this year. by duringe supported to the u.s. pace. it could cause many counterparts to go higher, but i want to remind investors that a buyback program will depend on not only
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the revenue, but also on how floyd -- have deployed of their capital. you may expect some buybacks, or at least a buyback. david: that gives them room. they should take a little off the top and give it back to investors. what we aret looking for with the capital plans, spending plans, revenue costs, would we looking at? i would say to items investors are focused closely on. first of all, they have adjusted their cost savings target for the year for 2017. that should be offsetting the compliance costs it is facing. up to the moment, i think they have 6000 compliance staff in place, 1800 more than a year ago.
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not justurse -- it's hsbc. hsbc has to deal with the agreement they have with the department of justice in the states, and it could be an ongoing cost for them, and any operating expenses savings would improve their return. david: just to recap, 3%, 4% topline growth. were looking at whether they did manage to increase their tier one capital ratio to 14%. were looking at a buyback in compliance. good work. we are looking for to those numbers at the top of the next hour. right, lots of other things happening in the world. let's get you caught up. here is first word news. david, the japanese
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prime minister has criticized china and russia after discussing north korea's latest missile test with donald trump. were in full they agreement more is needed from the international community. trump due to call south korean president moon. earlier, the u.s. military twoed a show of force with nuclear capable bombers over the peninsula. russia has told the u.s. to reduce embassy and consular staff by 755 people by september 1 following the new sanctions agreed by congress. that would lower the total to 455, the same number russia has in the u.s.. president putin said he would refrain from further measures, but the administration warned it would act if necessary. is longretaliation overdue. if the u.s. side decides to move furthertowards
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deterioration, we will answer and respond in kind. we will mirror this. we will retaliate. haslinda: japan's factory output rebounded in june as global demand supports economic recovery. increased production 1.6% from may, when it fell 3.6%. measured year over year, production was up almost 5%. global demand and a weak yen have helped to deliver five consecutive quarters of expansion, the longest run in a decade. global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. david: thank you. still ahead, we are looking at the stock market losing its heat, the impact on markets with this disarray in division signs of in tokyo. before that, share buybacks en vogue or do we will ask why.
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that is coming up next. this is bloomberg. ♪ buybacks are en vogue. we will ask why. that is coming up next. this is bloomberg. ♪
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♪ david: this is "bloomberg markets: asia." let's look at the latest business flash headlines. bank planning a direct offer for charter communications after an offer for sprint was rejected. unitopose combining sprint . we are looking at a cash and stock merger. the new company within pursue t-mobile. chartered says that understands it would be attractive to sprint, but is not interested. therts out of india saying proposed sale to flipkart may be off.
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a newspaper citing three people with knowledge. snapdeals largest investor. ' softbank says the decision is likely by this evening. now, the recovery in china has helped komatsu's profit to double to just under $330 million, the world number two maker of construction and mining equipment. sales up 44%. supportom competitors the turnaround in the construction sector. right, let's talk fashion. buybacks are en vogue in hong kong. it is giving the markets relatively cheap equities a further boost.
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joining us to talk further about this is the chair and cio at atlantis investment management, and also our markets reporter is here. you were the story, more buybacks. what does that mean? >> we have seen such a solid rally, and one reason is companies buying back their own shares. some corpus might be feeling their share prices are lagging behind. we still have record low interest rates in hong kong. it seems like this is a good window to buy back your own shares and give them abe host. david: they essentially bar road to give it back. makew interest rates does it easier to fund these buybacks and less attractive to maintain their cash piles. you can also say why don't you invest in your business some people are asking that. some companies might not be seeing those prospects right now.
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david: the perennial theme. this whole buyback investment theme, is that something you are trading on at the moment? do see a continuing for the rest of the year? not really in hong kong. chinese large cap, the money flow from china, so they have been outperforming. hong kong tycoons and the big companies are lagging behind, so buybacks are a way to show ratherent of the company than boost their share price. to showy it is a way serious want to be about your share price performance. at the end of the day, it is all about valuations and earnings. buybacks, they are always
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buying back their shares before some big event or before they expect the share price to rally. david: it is cheaper to do so i guess. you mentioned earnings. earnings are coming up. that will be a key driver. >> exactly. we have hsbc and about 35 minutes. david: 43. >> we should be precise here. we have c.k. hutchinson coming this week, but the key issue is that expectations are already quite high. we are in an eps upgrade cycle for hong kong and the market is around a two-year high. i guess the question is whether there is room left for hong kong to rally. >> think so. i think the hong kong market has been underperforming the global indices for a while. we have been enjoying
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a rally, but the rally has been for from by strategy the mainland. from the main forces mainland that are buying hong kong. this rally will be continuing because i don't expect the southbound money will stop here. there will be more pushing forward, not only because of the file you wish in's in hong kong, but the policy from mainland chinese policy leaders, they wanted to see something happening at least in hong kong, then follow that up with a-shares. a-shares became the most vulnerable and are lagging behind the world in terms of indices, but i perceive that the hong kong index, especially the -- hang seng is likely
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to challenge 30,000 in a matter of months. david: before the end of the year? >> fits my english. i hope so. david: so looking at where we are, that's more than 10% from now. 10% -- e ready 10%, so david: that's the point. we have arctic on 25%. >> we have been underperforming the world for three years. you think 20% is too big. now you will see more. are, we are trading 10-15 years moving average in terms of pes, but they're only a few large caps moving because of this year's momentum being
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trading behaviors. most of the great companies are not moving yet could they are small and medium companies. david: we will get your investment ideas in a few minutes. you stay with us. we continue the conversation in hong kong. 10% to 50%? that is something. stay with us. this is bloomberg. ♪
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david: this is "bloomberg markets: asia." ,ata out of china this morning slowing marginally in july. 51.4, down from 51.7 the previous month. the statistics bureau says the slowdown was down to hot weather. it says the sector does remain resilient and will continue to deliver growth. 54.5, alsocturing
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lower than june. bac our guest back into the conversation. you look at the macro backdrop it is very good, but the rally in hong kong is mainly the quiddity driven. where is the money coming from? >> all coming from mainland china. based on the two stock connections, money from financial institutions, big corporate's, pouring into hong kong not only because hong kong is cheap, but the a-shares are performing badly and financial institutions coming from kong, onlyying hong index components, large caps. ,hat is exactly why the indexes
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all the cross-border indexes, companies arebut going nowhere. david: i want to bring up a graphic to highlight what you said. it has been just a few names. index on youri bloomberg. , hsbc, soof tencent on and so forth. do we rotate into the underperformers in the index or do we look at the smaller cap names? >> the answer is yes and no. looking at this year's performance, you have no choice but to follow the index components. that is the money flow and the momentum trade. value is, most of the massively underperforming because they cannot use their
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skills and talent if they don't follow the large caps. you don't have tencent, you are out of the game. it is a very strange year to perform, but there are many h-shares, really great companies. my investment strategy had to sectorthe rotation by selection. if you cannot follow sectors, you are out of the game. the number one sector is auto. we made good gains in autos. there are two we are still holding, and we expect they will have impressive earnings results. also, the top and controlled shareholders are buying their own shares, to echo what you said.
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but what elseers, . i like cyclical stocks. after three years, i have been getting away from cyclicals fox. all the signals come all the earnings are lining up. are oneks we are buying belt, one road strategy, number two bank, where the money theinues to be chasing names in hong kong, and number , doe, basically the company they have a strong cash flow? two they have dividends in the coming months. he so the three top already. this year is the sector rotation strategy. don't look at valuations.
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follow the momentum. david: follow the momentum, by cyclicals. -- buy cyclicals. lots more coming up next. this is bloomberg. ♪
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11:29 in it is singapore. police and demonstrators have clashed over remaking the constitution. spreadled as violence across the country. massive numbers of opponents are boycotting polls, sing the president wants to cut back on decades of democracy. president maduro has faced condemnation and the u.s. is considering sanctions. opec an independent producers to meet to discuss compliance on cuts and output. some countries
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have fallen behind in curbing production. 70% all compliance fell to in june after members including saudi arabia boosted output. at its best week last week amid signs the market is rebalancing. problemrgo has a new andowing accounts compromise data, now unwanted auto insurance. the bank may have charged 500,000 people for insurance they did not need. aboutives told investors the changes they were introducing in may come a but not about the insurance issue they had known about since july last year. global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. >> checking the markets midsession, japan online. new zealand and hong kong leading gains as this rally
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comes through in commodities players. oil $50 a barrel. up 6.4%. copper up 1%. chile raising its price forecast for copper. citigroup saying the rally is likely to continue. a lot of oil and see on the back of china pmi numbers. .5%, and the asx 200 from her by .5%. energy producers leading gains. not much movement, up by .3%. softbank is said to be planning a direct offer for charter communications. moving in thes markets, tencent coming back after that selloff friday. up by 1.8%, one of the best
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performers, so good momentum coming through from tech players. toshiba under pressure, off by 6.5%. digital and toshiba said to have come to an agreement over the sale of their chip unit. david: thank you. that hna has been told property ipo has been delayed. we are joined by our asian deals editor. it is a setback. how much of a setback? >> at least a few months. they are looking to add other firms, so it will be delayed until autumn. david: what are the chances they something similar for this ipo?
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>> we know other firms other than bank of america have been shying away from doing business with hna. , asgroup and morgan stanley well as the state-owned chinese banks have and shying away, and it is really a question of whether you want to jump in in the middle of this controversy. at this point, when you look at the company, what does it have to do to convince regulators and investors. fundamentally an ipo is about a growth story, so you want to convince regulators and potential investors that you have moved the on your troubles and that you can deliver growth and profits, a steady line of new property assets and plans for expanding. david: when was this supposed to be? in mid-june, which did not
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happen, and now at least until autumn, but remains to be seen how long it would take to find someone. david: you have to find and underwriter. >> it is the first step. david: the busiest step. thank you for that. hna losing a bank. let's see if they find another one to get that ipo up and running. it is the last trading day of the month. yet again, gains globally for global stocks. this is the seasonality graphic we have. i know it looks confusing. essentially what it shows you is this right here. there we go. the seventh straight month of gains this year. in november and december, and we are looking at nine straight months of gains.
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when you look closer at these numbers, these aren't your typical monthly returns. the top panel shows you what you typically average. we are doing to the last 10 years of data for a specific month. a good example would be sell in a selloff intond the summer, 1.4% global stocks, return .3%, and he we are 2.7%. if you compare this to july last year, the third row from the top, there is so lopez effect, 4.2% coming off a fairly dreadful june when the brexit vote took place. out, 2017 hasting not in a normal year for markets by any measure. when you look at how far equities have come up and bonds have held up, one of these
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things has to give. one focus of the moment is japan. the public support for the prime strategist are considering whether he could step down. that could further weigh on stocks in japan, which are rolling this year. let's get more on the story. nice to see you. was losingut why shinzo abe be so bad for markets. we know why, but flesh out that idea for us. >> hi. like you said, it could be obvious, but foreign investors have been cheerleaders for abenomics, about expensive fiscal stimulus and monetary stimulus and corporate reforms,
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but losing all of this, investors are saying it could make pessimism surrounding japan become the dominant segment for japanese equities again, and deflation, and decreasing population. right now,erms of what has changed for the equity market? the polls have suggested support might be waning combat but has anything fundamentally changed in the equity market? >> one of the things driving equity markets since brexit is a weaker yen, expectations for a surge in profit growth, and etf buying, but a lot of things are not as strong of a factor as they have in. expectations for a weaker yen have been tempered with the federal reserve showing a dovish stance to rate hikes them
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before, and corporate earnings, expectations have been high. if earnings come in on par with expectations, investors believe forill not be a huge driver the overall market, though it could push up individual stocks. why are some investors still overweight on japan then? >> it has a lot to do with violations and earnings. topix is still 14 times, europe 16, and the u.s. at 19 soes estimated earnings, japan could look cheap, even though it has been rallying recently. 130% over five years, but has hit a snag recently. what would bolster japanese
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equities? short-term? >> in the near term, the yen. towards theple look yen for cues because it could boost stocks, but for the the-term, going back to discussion over abe it's important that the government push for reforms stays over the long run. that is what foreign investors look towards when they look for long-term investment targets, better corporate governance, efficient management, and more profit margins. arrow we'vethird 3-4 years, nicer work. nice to see you.
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the story on the website. north korea's latest belligerence raising stakes, so we have views an interview coming up next. this is bloomberg. ♪
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♪ at thelet's have a look latest business flash headlines. come up .6% into lunch break. the biggest pop into-three weeks after china's biggest coal miner expects first half profit to double thanks to higher prices and higher volumes. 143%,come should rise $3.9 billion. that would exceed the whole of 2016's total, which was its
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first profit in four years. cut 17argo said to senior executive positions at his community bank after the fake account scandal based on an internal memo. a number of regional presidents will fall to 91. wells fargo was fined $185 million over accounts opened without the permission of its customers. movies, warner bros. world war ii epic, dunkirk held onto the top spot for a second week in, a further $28 million, total receipts to above $100 million. sold $26 million
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worth of tickets, but was almost universally panned by critics. it suffered badly from bad reviews and social media sentiment. there we go. right, let's talk about what happened on the weekend. the japanese prime minister criticized china and russia after discussing the latest north korean missile test with donald trump, saying they were in full agreement that more needs to be done from the international community. china remains worried about the instability on its border. >> see if you are asking me what is the solution, i will reply with the question, what is the goal? as long as the regime stays in power, and they are likely to time,n power a long de-nuclear station is not possible. freezing of deal about
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the program might be possible that it is a big question whether the north koreans are interested in such a deal and whether the american administration is willing to likeiate a deal that is paying blackmail. it will not happen soon, so i would expect a great deal of meaningless actions like these american bombers. what does it change? it just makes americans and south koreans feel better. we have seen, colbert kos -- comicfrom kimye bellicose rhetoric from pyongyang. isn't there an argument that beijing doesn't have the leverage that it likes to pretend that it has a lot of the
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time? korean diplomat speaking privately made a wonderful joke. china does not have leverage over north korea. it has a hammer. so china cannot influence north korean decisions or fine-tune policy. china can deliver a mortal blow to the north korean economy by stopping supply of subsidized oil and reducing economic exchanges with north korea. this is where china can do, but the result is likely to be a massive economic collapse of the north korean economy, maybe starvation, and instability. it is a big question whether the north korean government will agree to surrender its nuclear weapons in facing such a possibility, probably not.
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he faces two choices, north korean developing nuclear weapons but stable, or collapsing north korea. it is obvious china is still interest for the second option. do they have any interest in doing anything but met maintaining -- but maintaining the status quo? >> of course china is status quo power. they would like to reduce the north korean nuclear potential. they don't like north korean nukes, but status quo is far more important and significant for china than dealing with the north korean nuclear station. david: let's get more from our asian government editor, dan kincaid. the rhetoric heating up once again. what is different about this test from previous tests? happened inthat it
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such quick succession, we have been waiting months for an icbm, then you have two tests within a few weeks of each other. we saw the trump administration come out and hit china and russia ready hard, calling them economic enablers of north korea. shinzo abe repeated that line going after china and russia, so you see a hardening between the major powers, the u.s. and its allies on one side, china and russia on the other side. even at the united nations, there is a question where does this go? nikki haley saying it is not even worth going there to get another resolution this time. david: there was a call between president trump and prime minister abe. we don't know what to lace, but what did they say after? any statements? came -- abe came out and
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said china and russia should do more to pressure north korea. after this test, please so what we always see from the u.s., flying bombers, rhetoric, missile tests. david: you mentioned earlier what was different is japan pointing fingers and joining the u.s. in pointing their finger at china and russia. what is the risk of inflaming tensions between these two sides? dynamictrategic remains the same. if there is a military strike, there is the potential to unleash damage unlike we have seen in half a century back to korean war, massive
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casualties, etc. on the other hand, sanctions don't work because china continually provides an economic lifeline to north korea. china is not ready to give that up. they see the collapse of the regime an immediate threat to them. we continue in the stalemate. there does not seem to be movement or new ideas on either side. it does become china's problem if we get a regime collapse. is there anything they can do to pressure china to do more? >> that is the big question. after chinagoing and defended xi jinping. he seemed to give that up, and now we have him saying china is doing nothing a north korea. i don't see a lot of other ideas on how to go about that right now. they are threatening military
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action if necessary. that contains tremendous risks. the question is how do you get to the negotiating table? u.s. and south korea to step back and say we accept some semblance of new trick capabilities come a freeze that there, but the u.s. one except that either, so that the nam x are still the same in that regard. david: unless we see an escalation. dan kincaid, thank you for joining us. let's have a look at what is coming up, pouncing back. changing inwhether the pakistani market can bring up return to the economy. this is bloomberg. ♪
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♪ david: this is "bloomberg markets: asia."
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i am david ingles. have a look at the opening numbers, currency as well. it is not news anymore. a new record for both benchmarks. up .4%. sensex, the highest since 1979. 32,500 the next psychological target. region, thehe resignation of the pakistani prime minister may bring relief to the stock market. it tumbled 13% after the supreme court sought investigation into his finances. let's get more from our editor out of mumbai. nice to see you. talk to us about what happened during this investigation. >> investors got some clarity
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that sharif is out. he could not stand for officer be in office because he was not honest about dealings of his family's companies. hence they barred him from office. have a youngery brother as prime minister once he gets elected from the seat that sharif has stepped down from. for the market as you pointed may in% down since anticipation that pakistan was getting into the emerging market index of msci. since then, it has fallen quite a lot because of this uncertainty investors had in worried about. david: how does the succession plan of sharif affect the sentiment as we head into markets? thees, the sentiment will
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looking up. did come uparty very quickly to come up with a plan, and interim prime minister who said sharif will become prime minister once he wins election. we have been speaking to people including those who are close to sharif and say he is an able administrator, works from 8:00 a.m. to midnight and has the capability to bulldoze the rocker see to get things done, so in that respect it should he good for the stock markets, but there are negatives. you have removed a prime minister from pakistan and pakistan has never seen a cry minister complete a full term. that is a big negative. the army plays a dominant role, and that should be another concern. what other concerns might
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foreign investors have at this point? two i justom the mentioned, there are concerns there could be other political threats to the incoming prime minister, and of course the terrorism threat that is always present in pakistan. david: very nice reporting there. that was our south asia managing editor life out of mumbai. top of the hour, bloomberg markets: middle east. joined by yousef gamal el-din. what is in store? big day for earnings. hsbc numbers expected during the program. we will have a conversation with the cfo, shedding light on the figures, but scrutiny on hsbc for center on expectations a potential share buyback program. also, one of the largest
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retailers in this part of the world, the group ceo joins us. plenty more at the top of the hour. this is bloomberg. ♪
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whoooo. i enjoy the fresher things in life. fresh towels. fresh soaps. and of course, tripadvisor's freshest, lowest prices. so if you're anything like me...'ll want to check tripadvisor. we now instantly compare prices from over 200 booking sites... find you the lowest price... ...on the hotel you want. go on, try something fresh. tripadvisor. the latest reviews. the lowest prices.
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